The European Union could demand the return of millions of pounds provided to help West Midland businesses, after the body which received the money was scrapped.

Taxpayers could face a bill for “substantial repayments” of up to £18 million, according to regional development agency Advantage West Midlands.

The agency, which itself is facing the axe, issued the warning in a report presented to Business Secretary Vince Cable.

Ministers have asked AWM to draw up plans for the disposal of the assets it accumulated in its 13 years as the region’s official regeneration body.

It spent £185 million building a property empire of 44 sites, which now have an estimated value of just £100 million because of falling property prices.

A report prepared for Dr Cable warned that the EU is likely to reclaim funding provided to help pay for Business Link West Midlands, which offered advice to small and medium-sized businesses in the region.

It received £18.8 million from the European Regional Development Fund to help pay for its work between 2007 and 2013 – but has now been scrapped.

The report warned: “All of this is at risk of potential clawback subject to future audits. Although the risk of a total clawback of £18.8 million is minimal, there is a degree of risk for some substantial repayments should any future audits find ineligible expenditure or issues with procurement.”